Scores of followers gathered at the Shar Minub monastery in the outskirts of Kathmandu for the cremation rites of the 62-year-old Buddhist monk Shamar Rinpoche, police said.
The Tibetan exiles lined up to offer white and orange scarves and recited prayers refraining from any political protests.
Police personnel were present at the site for security but did not interfere with the proceedings.
Fearing that the ceremony would spark anti-China protests by Tibetans in the capital, the Nepalese government had initially refused to allow the remains of Rinpoche to be brought into the country but later reversed the decision.
The late Shamar Rinpoche himself had expressed a wish to have his last rites performed in the country where Lord Buddha was born, said Lama Dawa Sangbo Yolmopa, who has been actively involved in bringing the body back.
After the 62-year-old Rinpoche died of a heart attack in Germany last month, his body was flown to India for his followers there to pay their last respects.